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2 tax increases could appear on Los Angeles' spring ballot

Alice Walton

As chair of the Budget and Finance Committee, Councilman Paul Krekorian told his colleagues it's time to get real about how the city of Los Angeles will close its structural deficit. Andres Aguila/KPCC

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The tax that homebuyers pay when they purchase property in the city of Los Angeles would double next spring under a proposal to reduce the city’s ongoing deficit.

A measure to increase the city’s documentary transfer tax should appear on the March ballot, according to a recommendation from City Administrative Officer Miguel Santana. The proposal would increase the tax from $4.50 per $1,000 of a home sale to $9 per $1,000.

For the average homebuyer, that would increase the tax from $1,733 per home sale to $3,465.

During the housing boom that coincided with fiscal year 2005-06, the city received $217 million from the tax. That’s in contrast to this year, when budget officials expect to receive $150 million from the documentary transfer tax.

The projected deficit for fiscal year 2013-14, which starts July 1, is $216 million. Councilman Paul Krekorian, chair of the Budget and Finance Committee, told his colleagues that it's time to face reality.

"We have to talk about the fact that we are struggling [at] this moment, today, to provide the basic services of government that our constituents expect from us and that our constituents are entitled to," Krekorian said.

Councilman Dennis Zine voted against analyzing the tax increases.

“I think it’s a terrible time to increase taxes all across the board,” he said. “The people are going to say, 'At what point is enough?'"

Though the Los Angeles City Council will vote this fall on whether to include the measure on the spring ballot, the tax increase was assumed in Mayor Antonio Villaraigosa's 2012-13 budget, according to the CAO. It would take a majority vote of the electorate to pass the tax.

“While the documentary transfer tax may not place an equal burden on every city taxpayer, it is part of balanced approach to city revenue which includes property, sales, business, utility, hotel and parking tax,” Santana wrote in his report. “An individual revenue source may fall disproportionately on a segment of taxpayers, but combined, they more equitably distribute the tax burden.”

Voters could also see a ballot measure to increase the parking tax.

Right now, the city receives 10 percent of what drivers pay to park in lots and garages. That rate puts Los Angeles behind San Francisco, which receives 25 percent, and Pittsburgh, which receives 45 percent. The CAO wants to increase the tax to 15 percent, which would generate an additional $45 million a year. It would require a majority vote of the electorate to pass.

City officials could also pursue a 1 percent increase in the sales tax and an entertainment tax, though the CAO is not recommending those actions at this time.

Reports on the housing and parking taxes are due to the L.A. City Council by Oct. 1.